The story is told that five years after Hannibal’s victory at Cannae, with his troops camped outside the very gates of Rome, the Roman Senate auctioned off, at full price, the very ground upon which Hannibal was standing; perhaps the first example in history, given the Carthaginians’ subsequent retreat, of the market as a predictor of future political events.
More than 2,000 years later, the markets are still the best single predictor of political events, but you’d never know it if you get your clues about such things not from financial and economic data but from that breed of journalists called political reporters.
A couple years ago this was the subject of a blog called “What Do Political Reporters Know?” The answer given to that question (little of value) is as true today as it was then, but more about that later.
First, let’s take a brief stroll down history lane. For all the angst and surprise now being expressed by many about the state of the American economy, it’s not as though we couldn’t see some of this coming. Indeed, many people (those who follow the markets) knew by election time, 2008, that the country was in great economic distress. Some knew this even earlier.
And how did they know? Let’s count the ways: They knew because commodity prices, especially oil and gold, were rising rapidly; that unemployment was rising and the dollar was falling; and that two of the most iconic names in American industry – General Motors and Chrysler – were petitioning the government for assistance to avoid bankruptcy.
They knew because in September of that year Lehman Brothers bellied up, the largest bankruptcy in U.S. history; and because, after peaking in 2006, house prices began a steep fall, such that by December 2008, the Case-Shiller home price index reported the largest price drop in its history.
All of this was known by people who follow the markets; this, and something else too: They knew that government at all levels – state, federal, and local – were running big and unsustainable deficits, tricked out with accounting gimmicks and featuring licentious borrowing, often to pay off unfunded liabilities. In short, they knew that governments were running the same kind of game for which Bernie Madoff would later get a life sentence in the slammer.
Given that nobody had ever seen anything like this kind of economic maelstrom since the Great Depression (even as aspects of it – most notably, housing and unemployment – were to get vastly worse in the years following), and given too that this was occurring right in the middle of a presidential election, one would expect that historians reviewing the period would find that the “people’s sentinels” – political reporters – shined a bright light on the economy and its portents, and obliged the candidates for the presidency to do likewise, right? Forget about it.
Not only did political reporters fail to oblige the presidential candidates to focus on the economy, they didn’t spend any quality time on the subject themselves. Instead, they treated the economy like a sideshow to the main event – the political horse race.
Now in fairness, it should probably be acknowledged that neither Barack Obama nor John McCain knew the first thing about the economy, and Obama’s only passionate comment about the matter – that he inherited the mess from President Bush – is not without some factual bases.
But none of this is to excuse the triviality and nonperformance, then and now, of the nation’s political reporters. More importantly, the mere knowledge of reporters’ shortcomings isn’t enough to enable citizens generally to make smart and informed decisions about those economic and socio-political developments as will affect them personally down the road.
If, for instance, they wonder how they – or anyone without a defined-benefit pension plan – are going to be able to retire with interest rates near zero; or if they are concerned about the likely effect on crime and our civic culture of the impoverishment of millions of formerly middle-class people; or if they worry about the effect on their assets of further significant declines in the purchasing power of the dollar; or if, mindful of the growing might of a country like China, they are concerned about the future, including the future security, of their children or grandchildren; if, in other words, they are interested in things more serious than which political party is best spinning the misery, or likely to be awarded at the polls, then they need to begin to familiarize themselves with finance and economics.
There is no guarantee, of course, that a subscription to the Wall Street Journal, or any such, will make of you a veritable soothsayer. But it’s a safe bet that if you follow the markets you’ll get a better handle on those things that matter than if you rely only on political reporters for your news of the world.
And there is my lesson for the day. That’ll be $50 (payable in silver bullion).
The opinions expressed above are those of the writer and not of The Media Institute, its Board, contributors, or advisory councils.
